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3 rd Annual Case Competition Yale Graduate Consulting Club April 4, 2014 PowerPoint Presentation
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3 rd Annual Case Competition Yale Graduate Consulting Club April 4, 2014
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  1. Dish Mobile A New Horizon for Satellite Broadcasting 3rd Annual Case Competition Yale Graduate Consulting Club April 4, 2014

  2. Recommendation Though lucrative in the short term, regulatory issues likely to prohibit horizontal merger with DirecTV. Strategic merger for long-term growth through wireless bundling and streaming of video content. Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  3. Market Analysis DBS has no growth for the last 3 years MVPD Market Breakdown 99.3 mn 20.1 4.8 14.1 4.9 4.1 Over-The-Top Streaming is Growing Rapidly 4.5 12.1 21.9 Sources: FCC, Moffett Nathanson, DISH & NFLX 10-K Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  4. Market Analysis “ The pay-TV industry has reported its worst 12-month stretch ever. “ Craig Moffett and Michael Nathanson, Media Stock Analysts Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  5. Market Analysis “ “ I think people are cutting the cord, I believe it is less risky, long-term, to embrace change. Charlie Ergen to D: Dive Into Media Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  6. Dish Strategic Advantage STRENGTHS WEAKNESSES Cash:Debt($9.74 bn:$13 bn) H-block spectrum @ $ 1.5bn + $ 4.5 bn in other spectrum Dish experienced large decreases in revenue growth Dish Pay-TV Net Additions (Thousands) • No infrastructure for acquired spectrum Saturatedpay-TVmarket Sources: Dish & DTV 10-K Financials Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  7. Strategy: A Time for Change Future Directions Merge to ensure long-term growthand create synergies Current Efforts Expand to New Markets Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  8. Dish + DirecTV Merger Horizontal Merger Valuation We valuate that DirecTV is worth $59.06 bn @ $80.55 /share. Other estimates range from $57 bn - $80 bn We propose a stock-stock exchange : 1 DirecTV = 1.17 Dish-DirecTV Sources: Valuentum Equity Research Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  9. Dish + DirecTV Merger PROS CONS Sources: Valuentum Equity Research Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  10. FCC & Dish + DirecTV Merger “ The combination … would have us replace a vibrant competitive market with a regulated monopoly. “ Former FCC Chairman Michael Powell in Dissent of the Dish-DirecTV merger of 2002 34.2 4.8 4.9 4.1 4.5 12.1 21.9 Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  11. Introducing Dish Mobile Switch to Dish Mobile today to enjoy uninterrupted internet everywhere! Source: TVEverywhere.com Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  12. Introducing Dish Mobile “ “ The Bundle Goes Mobile Internet Phone INTERNATIONALCOVERAGE!! NO MORE WIRES! TV Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  13. Dish + T-Mobile Merger Valuation We valuate that T-Mobile is worth $29.00 bn @ 38.54 /share. Other estimates range from $26 bn - $36 bn • We propose a stock-stock exchange : 2.09 T-Mobile = 1 Dish Mobile Sources: Valuentum Equity Research Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  14. Dish-Mobile Growth Projections Historical Data: Dish & T-Mobile Quarterly Reports Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  15. Summary of Recommendations Though lucrative in the short term, regulatory issues likely to prohibit horizontal merger with DirecTV. Strategic merger for long-term growth through wireless bundling and streaming of video content. Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendations

  16. References [1] Dish Annual Report 2013 [2] DirecTV Annual Report 2013 [3] FCC 15th annual report for MVPD Market [4] Dish Fiscal 2014 quarterly report [5] DirecTV Fiscal 2014 quarterly report [6] Financial Statements for Dish, Inc. - Yahoo Finance [7] Financial Statements for DirecTV, Inc. – Yahoo Finance [8] WSJ research report for DISH and DTV [9] T-Mobile Annual Report 2013 [10] T-Mobile Fiscal 2014 quarterly report [11] IBISWorld Industry Report on Mobile Carriers [12] IBISWorld Industry Report on PayTV [13] Professor Robert F. Bruner Valuation Analysis [14] Macabacus Valuation Spreadsheets Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendations

  17. Appendix 3rd Annual Case Competition Yale Graduate Consulting Club April 4, 2014

  18. Pay TV Market Trends Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  19. MVPD Market Analysis Source: National Cable and Telecommunications Association Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  20. Cable Price to CPI You now pay 48% more for Expanded Basic than you did in 1986* Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  21. Broadband Deployment Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  22. Potential Global Markets Source: Rethink Technology Research Market Analysis Strategy Dish + DirecTV Dish + T Mobile Recommendation

  23. Mexico & Latin America Satellite TV Figures Market Analysis Strategy Dish + DirecTV Dish + T Mobile Recommendation

  24. WACC Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  25. Valuation Dish Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  26. Valuation DirecTV Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  27. HHI Calculations >100 = highly competitive; >1500 = unconcentrated; >2500 = moderately concentrated; <2500 = highly concentrated Increases over 100 provoke scrutiny by the DoJ Market Analysis Strategy Dish + DirecTV Dish + T Mobile Recommendation

  28. Valuation Dish + DirecTV Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  29. Comparison of Wireless Carriers Source: IBISWorld; WSJ Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  30. Operational Efficiencies 2.6 bn = 2.0 bn increased sales (bundling) 0.2 bn divestment of Airwaves 0.4 bn New Technologies? 2.3 bn = 0.7 bn from reduced marketing expenses 0.4 bn from satellite divestment 0.5 bn from improved contract negotiations 0.7 bn from reduced employees Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  31. Dish + T-Mobile Merger “ It's going to be hard to convince consumers that reducing four firms to three is actually going to improve competition for their benefit. “ About Sprint & T-Mobile Merger, William J. Baer, Assistant to the Attorney General T-Mobile Subscriber Growth Net Additions (thousands) Source: Cisco, 2013 Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  32. Bundling Projection Assumptions Assumptions - Quarterly EBIT tracks inflation - 80% bundling discount - 5% sign-up crossover/qtr Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation

  33. Valuation Dish + T-Mobile Market Analysis Strategy Dish + DirecTV Dish + T-Mobile Recommendation